U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

49–112 

" ! SENATE 109TH CONGRESS

1st Session 

TREATY DOC. 

2005

109–5 

TAX CONVENTION WITH BANGLADESH 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED 

STATES OF AMERICA AND THE GOVERNMENT OF BANGLADESH 

FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED AT DHAKA ON SEPTEMBER 26, 2004 (THE ‘‘CONVENTION’’); WITH AN EXCHANGE OF NOTES ENCLOSED 

OCTOBER 27, 2005.—Convention was read the first time, and together 

with the accompanying papers, referred to the Committee on Foreign 

Relations and ordered to be printed for the use of the Senate 


E:\Seals\Congress.#13
(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, October 27, 2005. 

To the Senate of the United States: 

I transmit herewith for the advice and consent of the Senate to 

ratification a Convention Between the Government of the United 

States of America and the Government of Bangladesh for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

with Respect to Taxes on Income signed at Dhaka on September 

26, 2004 (the ‘‘Convention’’). An exchange of notes is enclosed, and 

the report of the Department of State with respect to the Convention is transmitted for the information of the Senate. 

This Convention, which is similar to tax treaties between the 

United States and other developing nations, provides maximum 

rates of tax to be applied to various types of income and protection 

from double taxation of income. The Convention also provides for 

the resolution of disputes and sets forth rules making its benefits 

unavailable to those who are engaged in treaty forum shopping. 

I recommend that the Senate give early and favorable consideration to this Convention and that the Senate give its advice and 

consent to ratification. 

GEORGE W. BUSH. 

(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, DC, September 23, 2005. 

The PRESIDENT, The White House. 

THE PRESIDENT: I have the honor to submit to you, with a view 

to its transmission to the Senate for advice and consent to ratification, the Convention Between the Government of the United States 

of America and the Government of the People’s Republic of Bangladesh for the Avoidance of Double Taxation and the Prevention 

of Fiscal Evasion with Respect to Taxes on Income, signed in 

Dhaka, on September 26, 2004 (‘‘the Convention’’). An exchange of 

notes is also enclosed for the information of the Senate. 

The Convention generally follows the pattern of the 1996 U.S. 

Model Tax Convention (‘‘the U.S. Model’’) while incorporating some 

provisions found in recent tax treaties between the United States 

and developing nations. It provides for maximum rates of tax to be 

applied to various types of income, protection from double taxation 

of income, and exchange of information. The Convention also contains rules making its benefits unavailable to persons who are engaged in treaty shopping. 

The Department of the Treasury and the Department of State cooperated in the negotiation of the Convention and the exchange of 

notes. Both Departments have given their full approval. 

Respectfully submitted. 

CONDOLEEZZA RICE. 

Enclosures: 

1. Key Provisions of the U.S.-Bangladesh Income Tax Convention. 

2. Proposed message to the Senate. 

KEY PROVISIONS OF THE U.S.-BANGLADESH INCOME TAX

CONVENTION

The proposed Income Tax Convention with Bangladesh generally 

follows the pattern of the U.S. Model treaty. Although there are 

certain deviations from the Model, similar to those found in many 

recent U.S. tax treaties with developing countries, the Convention 

overall tends to provide for less source-country taxation than in 

many U.S. tax treaties with developing countries. 

With respect to income from business activities, Article 7 of the 

Convention generally follows the standard rules for taxation by one 

country of the business profits of a resident of the other. The 

source country’s right to tax such profits is generally limited to 

cases in which the profits are attributable to a permanent estabVerDate Aug 31 2005 06:37 Oct 28, 2005 Jkt 049112 PO 00000 Frm 00005 Fmt 7633 Sfmt 6602 E:\HR\OC\TD005.XXX TD005
VI

lishment located in that country. As do all recent U.S. tax treaties, 

this Convention preserves the right of the United States to impose 

its branch taxes in addition to the basic corporate tax on a branch’s 

business. 

Under Article 8 of the Convention, income from the operation of 

ships and aircraft in international traffic, and from the rental or 

maintenance of containers used in international traffic, is taxed in 

a manner consistent with the U.S. Model. Article 8 permits only 

the country of residence to tax profits from the international operation of ships or aircraft, including profits from the rental of ships 

and aircraft when the ship or aircraft is operated by the lessee in 

international traffic, or when the rental activity is incidental to the 

operation of ships or aircraft by the lessor. All income from the 

rental or maintenance of containers used in international traffic is 

likewise exempt from source-country taxation under the Convention. 

With respect to withholding rates on investment income, the proposed rates are generally lower than those in some recent U.S. tax 

treaties with non-OECD countries. Article 10 of the Convention 

provides that dividends from direct investments are subject to tax 

by the source country at a maximum rate of ten percent. The ownership threshold for direct investment is ten percent, in order to facilitate direct investment. Other dividends are generally taxable at 

a maximum rate of 15 percent. Under Article 12, royalties may be 

taxed by the source country at a maximum rate of ten percent. 

Under Article 11 of the Convention, most interest may be taxed 

by the source country at a maximum rate of ten percent. However, 

interest income received by a financial institution (including an insurance company), and interest paid with respect to the sale on 

credit of industrial, commercial or scientific equipment or other 

merchandise, may be taxed at a maximum rate of five percent. Interest derived by a Contracting State, and interest on obligations 

guaranteed or ensured by a Contracting State, shall be exempt 

from taxation by the source country. 

The reduced withholding rates described do not apply if the beneficial owner of the income is a resident of one Contracting State 

who carries on business in the other Contracting State and the income is attributable to a permanent establishment or fixed base 

situated in that other State. If the income is attributable to a permanent establishment, it will be taxed as business profits, and, if 

the income is attributable to a fixed base, it will be taxed as a payment for independent personal services. 

The maximum rates of withholding tax described in the preceding paragraphs are subject to the standard anti-abuse rules for 

certain classes of investment income found in other U.S. tax treaties. 

Article 13 of the Convention provides for the taxation of capital 

gains and follows the format of the U.S. Model. Gains and income 

derived from the sale of real property and from real property interests may be taxed by the State in which the property is located. 

Likewise, gains or income from the sale of personal property, if attributable to a fixed base or permanent establishment situated in 

a Contracting State, may be taxed in that State. All other gains, 

including gains from the sale of ships, aircraft, and containers, and 

VII

gains from the sale of stock in a corporation, are taxable only in 

the State of residence of the seller. 

Articles 15, 16 and 18 of the Convention address the taxation of 

income from the performance of personal services, which is essentially the same as that under recent U.S. tax treaties with other 

developing countries, although these provisions grant taxing rights 

to the host country with respect to such income that is broader 

than in the U.S. Model. 

Article 17 of the Convention contains significant anti-treaty shopping rules, making its benefits unavailable to persons engaged in 

treaty shopping. 

Articles 25 and 26 contain rules necessary for administering the 

treaty and domestic tax laws, including rules for the resolution of 

disputes under the Convention.and for the exchange of information. 

The Convention would permit the General Accounting Office and 

the tax-writing committees of Congress to obtain access to certain 

tax information exchanged under the Convention for use in their 

oversight of the administration of U.S. tax laws. 

The Convention is subject to ratification. In accordance with the 

provisions of Article 28, it will enter into force upon the exchange 

of instruments of ratification. With respect to taxes withheld at 

source, it will take effect for amounts paid or credited on or after 

the first day of the second month following the date on which the 

Convention comes into force; with respect to other taxes, the Convention will take effect for taxable periods (in the case of the 

United States) or for income years (in the case of Bangladesh) beginning on or after the first day of January next following the date 

on which the Convention enters into force. 

Pursuant to Article 29, the Convention will remain in force until 

terminated by one of the Contracting States. Article 29 also provides that either State may terminate the Convention at any time 

after five years from the date it enters into force, by giving 6 

months prior notice through diplomatic channels. 

This Convention will be the first such Convention between the 

United States of America and the People’s Republic of Bangladesh. 

In 1981, the Senate gave its advice and consent to a convention between the two countries that was signed in 1980, subject to understandings relating to income from the operation of ships in international traffic and to the operation of the provision relating to exchange of information for tax purposes. The 1980 convention never 

entered into force because of intervening changes in U.S. domestic 

tax law. The concerns expressed by the Senate in the understandings to the 1980 convention have been addressed in the current Convention. 

(1) 


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